Brokerage : iM Securities
Analyst : Eui-young Ko, RA: Woo-sung Son
Investment Rating : Buy (Maintain)
Target Price : KRW 180,000 (Lowered)
Core Momentum : While short-term operating leverage is weighed down by sluggish IT set recovery and a faster-than-expected decline in the USD/KRW exchange rate, mid-to-long term structural health is reinforced by lean 30-day inventory, expanding industrial/automotive MLCC mix, and the 4Q24 ramp-up of AI accelerator substrates.
📊 1. [Valuation & Key Financial Metrics]
- Investment Rating & Target Price: Buy (Maintain) / KRW 180,000 (Lowered from KRW 200,000, applying a 10-year historical average P/B multiple of 1.55x [vs. previously 1.75x mid-to-high band] to 12MF BPS of KRW 114,701, reflecting downward revisions of -8% and -11% to 2024E and 2025E EPS forecasts)
- Current Share Price (As of Sep 24, 2024): KRW 135,700 (Upside potential: 32.6%)
- Market Capitalization: KRW 10.14T
- Key Financial Metrics & Forecast:
- Revenue: 2023A KRW 8.91T → 2024E KRW 10.35T → 2025E KRW 10.91T → 2026E KRW 11.56T
- Operating Profit: 2023A KRW 639.0B → 2024E KRW 788.0B (OPM 7.6%) → 2025E KRW 942.0B (OPM 8.6%) → 2026E KRW 1.11T (OPM 9.6%)
- Net Profit: 2023A KRW 423.0B → 2024E KRW 596.0B → 2025E KRW 727.0B → 2026E KRW 870.0B
- EPS: 2023A KRW 5,450 → 2024E KRW 7,683 → 2025E KRW 9,373 → 2026E KRW 11,206
- PER: 2023A 28.1x → 2024E 17.7x → 2025E 14.5x → 2026E 12.1x
- PBR: 2023A 1.5x → 2024E 1.3x → 2025E 1.2x → 2026E 1.1x
- ROE: 2023A 5.5% → 2024E 7.4% → 2025E 8.4% → 2026E 9.3%
- Dividend Yield: 2023A 0.8% → 2024E 1.1% → 2025E 1.4% → 2026E 1.7%
- 3Q24 Earnings Preview: Projected Revenue of KRW 2.60T (+12% YoY, +2% QoQ), Operating Profit of KRW 227.6B (+24% YoY, OPM 9%). Trimmed Revenue and Operating Profit forecasts by -2% and -9% respectively, reflecting a faster-than-expected decline in the USD/KRW exchange rate (every KRW 10 shift in USD/KRW impacts quarterly operating profit by KRW 5.0B–6.0B).
- Component Division & Pricing: 3Q24 MLCC shipment growth is estimated at +8% QoQ (slightly missing previous expectations), with fab utilization nearing 90% (1Q24 80%, 2Q24 85%). ASP is projected to contract -1.5% QoQ due to USD weakness/a lower USD/KRW rate (revised down from previously Flat), lowering Component OPM projection from 14.3% to 12.7%.
🚀 2. [Market Opportunities & Business Outlook]
- Inventory & Supply Discipline (Positives): Inventory days stand at ~30 days (matching the prior quarter), remaining well below the optimal level of 40 days. Both component and set makers maintain cautious real-demand-based supply, reducing the likelihood of sharp inventory destocking.
- Slow Demand Recovery & Operating Leverage (Negatives): Slow set recovery tempers YoY momentum. Despite ~90% fab utilization, operating leverage remains limited compared to past cycles due to price competition to defend market share post-Yen depreciation.
- Mid-to-Long Term MLCC Drivers: Expanding high-value MLCC demand across AI infrastructure/devices and automotive electrification (ADAS, HEV, and EV). The combined revenue share of industrial (including servers) and automotive MLCCs is projected to expand from 37% in 2023 to 39% in 2024 and 42% in 2025 (reaching 40% in 2Q24).
- Substrate Division: While PC recovery is expected to remain slow through year-end, mass production of AI accelerator substrates is scheduled to commence in 4Q24, contributing to 2025 earnings.
📝 Editor’s Comment (Perspective)
The analyst views Samsung Electro-Mechanics through the lens of a lowered target price (reduced from KRW 200,000 to KRW 180,000) to reflect subdued operating leverage amid sluggish IT demand recovery and a faster-than-expected decline in the USD/KRW exchange rate, while highlighting that the stock trades at 12MF P/B 1.18x near its historical valuation band floor. The core thesis emphasizes disciplined, real-demand-based supply and lean inventory (~30 days) alongside structural product mix upgrades—anchored by 4Q24 AI accelerator substrate mass production and an expanding industrial/automotive MLCC revenue mix (targeting 42% in 2025).
To evaluate whether this investment thesis progresses according to expectations, key tracking points include sustaining lean ~30-day inventory levels, defending Component division operating margins (~12.7%) amid FX fluctuations from a declining USD/KRW rate, the timely commercial ramp-up of AI accelerator substrates in 4Q24, and achieving a 42% revenue share for industrial/automotive MLCCs in 2025. These developments can be monitored through upcoming quarterly financial announcements, official company IR presentations, and regulatory filings.
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